With my July hedge position expiring today I need a new hedge position to insure the Hawking portfolio through August. I have therefore purchased 5 x 2070/2050 ($20 Wide) Vertical Put Spreads in the SPX Options expiring August 31 and have covered the cost of this purchase by selling 20 x 2150/2155 ($5 wide) Vertical Call Spreads. These positions were placed for a net credit of $400:
Update August 07,2015:
Today I sold 5 contracts of the 2030/2010 Vertical Put Spread at $4.20 to generate $2,100 credit. This “locks in” a minimum $2,500 profit with SPX closing below 2150 at expiration on August 31. Maximum profit would be $12,500 with SPX closing between 2030 and 2050. The current P/L profile is shown below.
Update August 27,2015:
Since price had breezed through the 2010/2030/2050/2070 Condor portion of this trade and with only a week left to expiration I have been trying to buy the position back to lock in a little more profit than the existing $2,500. However, it has not been easy to get fills on multi-leg trades due to the wide bid-ask spreads and high volatility premiums. I started on Monday by trying to sell the spread for $10 credit, but prices were jumping all over the place with my platform showing mid (bid-ask) price values anywhere between $20 credit and $20 debit (and sometimes even outside this range). When things calmed down a little on Tuesday I lowered my asking price to $5 – but was still not filled. With time to expiration fast approaching I was in the position of requiring a move above 2010 to generate a profit in excess of $2,500 with time decay working against me (technically I needed a strong positive delta move to compensate for the negative theta component of the Option premium). I lowered my asking price to $3 but was still not filled.
I was still not getting filled this morning so I decided to place a simpler trade and just buy back the 2010/2030 vertical spread portion of the trade. I was filled on this order at a $17 debit. Provided SPX does not close above 2050 this will give me an additional $1,500 profit ($4,000 total) – equivalent to the profit that would have been generated by selling the Condor position for $3. However, I do have the upside risk above 2050, although this would require a 2SD move – but in the current environment, not an impossible move.
The current Profit/Loss profile is shown below: